MNI 5 Things: Small Upside Tweaks in Brief RBNZ OCR Statement

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By Sophia Rodrigues

     SYDNEY (MNI) - The Reserve Bank of New Zealand left the official cash rate

unchanged at 1.75%. This was interim governor Grant Spencer's last monetary

policy decision and incoming governor Adrian Orr will take over the role on

March 27.

     Below are the five key observations we made from the statement Thursday:

     --The statement was shorter than usual and perhaps the first time in a long

time, there was no commentary on the exchange rate.

     --As flagged by MNI, there were small upside tweaks in the statement and

they point to the possibility of the RBNZ bringing forward forecast for first

OCR hike in the full Monetary Policy Statement due in May.  The RBNZ said

outlook for global growth continues to gradually improve. Significantly the RBNZ

said commodity prices have continued to increase and agricultural prices are

picking up.

     --The key addition in the statement was the comment that residential

construction continues to be hindered by capacity constraints. An important

change was the view that labor market conditions are projected to tighten

further versus the comment in February that labor market conditions continue to

tighten. This could have important upside implication for non-tradable inflation

forecast.

     --The RBNZ maintained the forecast for GDP to strengthen despite Q4 GDP

coming weaker than expected. As expected, the RBNZ said inflation is expected to

weaken further in the near term but retained the forecast that it will trend

upwards towards the mid-point of the target range.

     --The RBNZ maintained the forward guidance: "Monetary policy will remain

accommodative for a considerable period. Numerous uncertainties remain and

policy may need to adjust accordingly."

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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